Heidelberg Reports Positive Operating Result for First Time in Two YearsJune 16, 2011
At EUR -149 million, the financial result was once again below the previous year's figure of EUR -127 million. This was caused by high financing costs, and by the one-off expenditure associated with the repayment of financial liabilities and the restructuring of financing. The capital increase and the early repayment of financial liabilities helped to compensate.
Due to the financial result still having a very negative impact on the result before taxes, the company recorded an annual loss of EUR -129 (previous year: EUR -229 million). A proposal will therefore be put to the Annual General Meeting not to pay a dividend for the year under review.
The free cash flow was much better than expected. Despite high restructuring costs in the year under review, it reached EUR 75 million and was thus EUR 137 million better than the previous year's figure of EUR -62 million. The greatly reduced annual loss and the successful management of net working capital played a major part in this improvement.
Thanks to the capital increase and the much reduced annual loss, Heidelberg achieved a equity ratio of 32.9 percent in relation to the balance sheet total at the end of the reporting period. On the balance sheet date of the previous year, the equity ratio was only 20.1 percent. At the same time, the net financial debt fell by just under two-thirds, from EUR 695 million in the previous year to EUR 247 million.
“Heidelberg has once again secured its medium- to long-term financing. We have diversified our financing sources and made great strides in optimizing the maturity profile of loans. Thanks to our comprehensive cost-cutting measures, we have also further reduced the operating break-even threshold as planned. This will significantly improve our earnings situation in the future, too,” said Heidelberg CFO Dirk Kaliebe.
Results in the Equipment, Services, and Financial Services divisions
In the Equipment Division, orders were 24 percent up on the previous year at EUR 1,642 million. After adjustment for exchange rate movements, this represents an increase of around 19 percent. The division's sales also grew significantly, climbing 19 percent to EUR 1,516 million. This equates to a 14 percent increase after adjustment for exchange rate movements. The operating result excluding special items improved from the previous year's figure of EUR -153 million to EUR -98 million. The growth of sales, the resultant profit contributions, and the savings made all had a positive impact on the result.
In the Services Division, incoming orders were up 6 percent at EUR 1,099 million. The division's sales climbed by 8 percent to EUR 1,097 million, a 1 percent increase after adjustment for exchange rate movements. Sales of consumables in particular grew much more strongly than during the previous year. The division’s result of operating activities excluding special items benefited noticeably from the savings achieved through the reorganization, improving from EUR 12 million in the previous year to EUR 84 million.
In the Financial Services Division, sales dropped to EUR 16 million (previous year: EUR 19 million). Improved underlying conditions in the sector combined with intensive management of accounts receivable increased the division's operating result excluding special items to EUR 18 million (previous year: EUR 11 million).
Overall, the workforce fell by 668 in the year under review. As of March 31, 2011, the Heidelberg Group had a workforce of 15,828 worldwide (previous year: 16,496). Over the course of the year, short-time working was used to compensate excess capacity. Continued use will be made of flexible working time instruments to manage capacity during the current financial year, too.
Outlook: Break-even pre-tax result targeted for financial year 2011/2012 provided macroeconomic developments remain stable
The annual sales target, which Heidelberg intends to achieve within the next two or three years, has been set at over EUR 3 billion. Assuming that the economic environment will continue to be generally stable, the company expects to gradually approach this target during the current and next financial year. Due to drupa 2012 and the ongoing upswing in the print media industry, the increase in sales in the next year should be greater than in the current financial year. As during the reporting year, growth in the Heidelberg Equipment Division will presumably be stronger than in the less cyclically sensitive Heidelberg Services Division. The company intends to keep its directly financed portfolio in the Heidelberg Financial Services Division as low as possible.
Heidelberg was successful in drastically reducing its operating break-even point in recent years, and thereby in generating an operational break-even result of operating activities before special items during the reporting year. Assuming that the volume of business will increase, we therefore expect the operating result to improve during the current and the next financial year. In the medium term, Heidelberg is striving for a return on sales of over 5 percent with sales exceeding EUR 3 billion. Thanks to the large reduction in debt, the financial result will have a substantially less dampening effect than during the reporting year.
Assuming a stable development of overall economic conditions and of our industry, we are striving for a balanced pre-tax result in financial year 2011/2012 on the basis of a higher operating result and lower financing expenses. If favorable trends continue into the year of the drupa trade show, we expect our after-tax result to be in the black in financial year 2012/2013.
Additional details on the company can be found at www.heidelberg.com.